A prescription for healing the healthcare industry

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The year is 1900. Life expectancy is 47 years. Almost all hospitals in the U.S. are nonprofit institutions founded by religious organizations. More people die in war due to infection than in battle.

Fast-forward to today. Healthcare in the U.S. has ballooned into a massive industry worth $3 trillion. The United States spends approximately $9,237 per person for healthcare, roughly three times more than most other first-world countries. And yet, all that spending has not resulted in superior outcomes.

While the graph above is striking enough to spur anyone to immediate action, the implications of this unsustainable growth in expenses and what can be done to stifle it are not as clear.

We can only solve the problems that we can see, and most entrepreneurs don’t have experience working in healthcare, almost by definition. Take the story of John Crowley, who started Amicus Therapeutics after his two children were diagnosed in 1998 with Pompe disease — a severe and often fatal neuromuscular disorder.

In his drive to find a cure for them, he left his job in management consulting and became an entrepreneur. He became founder and CEO of Novazyme Pharmaceuticals in 2000, a biotech startup conducting research on a new experimental treatment for Pompe disease, which he credits as ultimately saving his children’s lives. His story is nicely told in this interview with Tim Ferriss.

Many founders working in healthcare today, like John Crowley, have personal ties to their companies. However, if we have to rely on new healthtech companies being born out of personal frustrations with the status quo, think of how many opportunities will go undiscovered.

I deeply believe the biggest reason we don’t see more entrepreneurs in healthcare is because they don’t understand the problems, and they don’t know where to start.

For all that spending, ($3.2 trillion in 2015) healthcare is largely a neglected and feared investment class — and for good reason. Healthcare is littered with heavy regulation, counter-intuitive payment incentives and deep-rooted politics. It’s far from a free market. Policy wants to move toward a market-based model, but consumers haven’t had a choice in 50 years.

There is strong evidence to show that things are moving in the right direction. Appointed by Barack Obama, Aneesh Chopra — who served as the first Chief Technology Officer of the United States, has accomplished a lot to change the healthcare culture.

He helped launch initiatives inviting innovation in healthcare, such as Open Innovator’s Toolkit, Argonaut Project, Startup America,, Open Data Conference (which I attended and wrote about), the “Blue Button” program and more. Today, as NavHealth chief executive, Aneesh remains focused on a future where health data is unlocked from the vaults of electronic health record companies and is made accessible to patients and innovators to create value.

Some of the biggest opportunities to improve the world exist in healthcare. The more smart people we entice to work on these problems, the better our world will be. Winning in healthcare can be building a billion-dollar company, while also tangibly improving and saving lives.

A few trends that are making healthcare an extremely attractive market right now:

  1. Large and massively inefficient $3.35 trillion market, and growing.
  2. Big regulatory shocks are happening, creating market openings for new players.
  3. The culture is increasingly open to new innovation

Below are a few prescriptions for different facets of the healthcare market. These aren’t solutions that are currently on the market, but hopefully they may inspire a new generation of entrepreneurs to seek their own cures along similar lines.

Rethinking advance care planning

Problem: Only about 30 percent of adults have an Advance Care Plan (ACP) expressing their wishes for end-of-life care; however, having an ACP significantly reduces costs to Medicare and other insurance plans — upwards of 60 percent.

Opportunity: Build a web product that makes it easy for people to create advance directives, easily access them anytime and share them with clinicians or family members. This would give peace of mind to patients and families while saving a significant amount of money for Medicare and other healthcare plans.

In 2011, Medicare spending reached close to $554 billion, which amounted to 21 percent of the total spent on U.S. healthcare in that year. Of that $554 billion, Medicare spent 28 percent, or about $170 billion, on patients’ last six months of life.

Medicine has come a long way in extending our lives, but those extra final months come with a steep price tag. CBS reported that Medicare spent $55 billion on doctors’ and hospital bills during the final two months of patients’ lives, and that “20 to 30 percent of these medical expenses may have had no meaningful impact.”

While patients have every right to dictate their medical treatment in their final days, their family members tend to have a “do whatever it takes” mentality. What they don’t realize, however, is that “doing whatever it takes” has huge costs and consequences of its own. When doctors use ventilators, intravenous fluids, heavy medication and dialysis machines to sustain a patient’s life, that patient often finds their identity and independence all but vanishes as they slowly fade away in a cold, clinical setting.

As our senior population continues to expand at its fastest pace in history, there is a growing need for end-of-life planning services that help patients and their families prepare for their final days. A few early-stage companies are working on facilitation and storage of advanced directives, like MyDirectives and Everplans. Tangentially, companies like Grace are beginning to enter the market, positioning themselves as tech-enabled “concierges” for people planning for, and recovering from, the death of a loved one.

On January 1st, 2016…

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